TMK IR PRESENTATION€¦ · TMK –Top-3 US OCTG producer with its market share at 10% in 2017...

March 2018

TMK IR PRESENTATION

2

TMK– Global Supplier of Full Range of Pipes for Oil and Gas Industry

MANAGEMENT

PRODUCTION

SALES

OIL AND GAS SERVICES

RESEARCH & DEVELOPMENT

THE COMPANY OPERATES MORE THAN 30 PRODUCTION SITES IN RUSSIA,

MANAGEMENT

PRODUCTION

SALES

OIL AND GAS SERVICES

RESEARCH & DEVELOPMENT

TMK sales by region (2017)

Canada:

1 production facilities

1 trade office

Russia:


1 R&D centre

1 trade house

USA:


1 R&D centre

1 trade house Oman:

1 production facility

TMK sales by product (2017)

(US$mln) 2014 2015 2016 2017

Revenue 6,009 4,127 3,338 4,394

Adj. EBITDA 829 651 530 605

Adj. EBITDA

Margin (%) 14% 16% 16% 14%

FCF(b) 252 498 395 77

Net Profit (Loss) (217) (368) 166 30

Net Debt 2,969 2,496 2,539 2,688

Key financials

Romania:• 2 production facilities

Kazakhstan:

1 production facility

1 trade house

27 production sites in Russia, the USA, Canada, Oman, Romania and Kazakhstan, with trade offices in 10 countries

Source: Company data

Note: Percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums

(a) Spears & Associates. Excluding China and Central Asia. Onshore and offshore drilling

(b) Calculated as Net cash flows from operating activities plus Net cash flows used in investing activities

Seamless OCTG42%

Seamless Line Pipe

13%

Seamless Industrial

15%

Welded Industrial

8%

Welded OCTG

4%

Welded Line Pipe

10%

Welded LD7%

US49%

Russia & CIS19%

Canada13%

2017E global drilling activity

by geography(number of wells drilled)(a)

Oil & Gas = 77%

Russia61%

Americas26%

Europe7%

ME & Gulf Region

3%

C.Asia & Caspian Region

2%

Others1%

…

TMK Today – Key Investment Highlights

3


Notes:(a) Company estimates for FY 2017

(b) Adjusted EBITDA for TMK represents profit/(loss) for the period excluding finance costs and finance income, income tax (benefit)/expense, depreciation and amortisation, foreign exchange (gain)/loss,

impairment/ (reversal of impairment) of non-current assets, movements in allowances and provisions (except for provisions for bonuses), (gain)/loss on disposal of property, plant and equipment, (gain)/loss

on changes in fair value of financial instruments, share of (profit)/loss of associates and other non-cash, non-recurring and unusual items

1

Combined exposure to some of the most attractive and dynamic regional oil & gas markets

Russia – large low-cost oil producing region; a major market with increased drilling activity in 2017

TMK - dominant player in Russian oil & gas with 38%(a) market share for pipes used in the oil and gas industry,

64%(a) market share in seamless OCTG

US OCTG market is at the recovery stage, following a c.75% demand contraction in 2014-2016 – with shale industry

supported by OPEC agreement and conducive political environment under new administration

TMK – Top-3 US OCTG producer with its market share at 10% in 2017

Cost-cutting discipline and consistent focus on de-leveraging

Cost-cutting programs with Adjusted EBITDA(b) effect of US$100m+ in the each of the past 3 years; disciplined capex

Continuous reduction in net debt (US$1bn+ reduction in net debt since 2013)

2

Low-cost position and stability of margins underpinned by significant vertical integration

High degree of vertical integration in the seamless business due to in-house steel production

Ability to pass through costs of steel products – demonstrated by stable margins throughout the cycle

Substantial improvement in the global competitive positioning on the back of Ruble devaluation in 2014-16

3

5

4

Superior governance practices and uniquely stable and experienced management team

Core management team unchanged since IPO in 2006

5 Independent Directors on the Board with vast diversified international and domestic experience

Industry-leading market position and large modern asset base

Dominant #1 player in seamless OCTG industry in Russia and Top-3 in the US

State-of-the-art underutilised production base with major investments completed over 10 years in 2004-14

Established longstanding relationships with major oil & gas upstream and midstream players

TMK Market Exposure = Highly Resilient Russian Market + US Shale Passing the Inflection Point

4

OCTG consumption in Russia and the US Global E&P investments

0

100

200

300

400

500

600

700

800

900

1000

20

10

20

11

20

12

20

13

20

14

20

15

20

16E

20

17E

20

18E

20

19E

20

20E

Source: Rystad Energy

5.7

6.5

3.8

2.7

4.6

2.0

1.9

1.8

1.9

2.3

7.7

8.4

5.6

4.7

6.9

0

2

4

6

8

10

2013 2014 2015 2016 2017

Russia US

(m tonnes) (US$ bn nominal)

Source: Metal Expert for Russian OCTG consumption, Preston Pipe & Tube Report for US

statistics

Other

US

Russia

CanadaChinaBrazilAustralia

NorwaySaudi Arabia

TMK – Superior Earnings Resilience Through the Cycle

5

2,159 2,323

1,411 1,281

2,256

2013 2014 2015 2016 2017

2,612 2,790 2,028 1,635

2,157

1,049 885

605

355

461

3,661 3,675

2,633

1,990

2,618

2013 2014 2015 2016 2017

2,422 2,560 2,410 2,412 2,668

1,866 1,842 1,461

1,046 1,113

4,288 4,402 3,871

3,458 3,781

2013 2014 2015 2016 2017

Total

pipes sales

volume

(ths. tonnes)

Adjusted

EBITDA

margin(a), %

Cash

conversion(b)

Seamless Welded Seamless Welded Total sales

15%14%

16% 16%14%

2013 2014 2015 2016 2017

26% 26%

18%14%

18%

2013 2014 2015 2016 2017

16% 15%

(2%)

(7%)

0.1%

2013 2014 2015 2016 2017

60% 65% 68% 67% 61%

2013 2014 2015 2016 2017

73%60%

7%

(32%)

41%

2013 2014 2015 2016 2017

Source: Companies’ public reporting

Note: (a) Adjusted EBITDA for TMK represents profit/(loss) for the period excluding finance costs and finance income, income tax (benefit)/expense, depreciation and amortisation, foreign exchange (gain)/loss,

impairment/ (reversal of impairment) of non-current assets, movements in allowances and provisions (except for provisions for bonuses), (gain)/loss on disposal of property, plant and equipment, (gain)/loss

on changes in fair value of financial instruments, share of (profit)/loss of associates and other non-cash, non-recurring and unusual items

(b) Calculated as (Adjusted EBITDA – Capex) / Adjusted EBITDA

38%55%

n.m. n.m. n.m.

2013 2014 2015 2016 2017

Vertically Integrated Model Ensuring Margin Stability

6

Scrap, HBI

Refractories,

ferroalloys and

other

consumables

Steel products price volatility Operating in one of the lowest cost regions for steel

production globally

Fully vertically integrated seamless pipe production (upstream

and downstream) across all regional divisions

Ability to pass through increases in the cost of steel products

to end-customers

Resilient margin throughout the cycle of high and low steel

prices

In 2016, an agreement with Metalloinvest for supply of hot-

briquetted iron (“HBI”) was signed

27%

24% 25% 26%24%

11% 12% 13%

8%10%

2013 2014 2015 2016 2017

Seamless Welded

543 531

347387

500

2013 2014 2015 2016 2017

HRC (FOB, Black Sea) Column2

TMK gross margin by product segments Production

of billets

Steel coil/

plate

Bending of steel coil or plate followed

by welding the seam at the wedges

Piercing, elongation,

reduction of billets;

pipe finishing

EAFsPipe making

facilities

Seamless pipe – simplified value chain

Welded pipe – simplified value chain

Perimeter of TMK operations in the value chain

Pipe making facilities

Source: Metal Expert

(US$/t)

Strong Position in Multiple End-Markets for Pipes Beyond Oil & Gas

7

Energy and Chemicals

Civil ConstructionAutomotive

Diversified Hi-Tech Solutions

Galvanised pipe for the outer steel frame of the Otkritie

Arena stadium in Moscow

Impact resistant seamless pipe shipped for the construction

of Zenit Arena stadium retractable roof in St Petersburg

Structural steel pipe for the stadium roof in Samara

TMK-ARTROM is qualified as an authorised supplier for

such companies as Dacia (a subsidiary of Renault)

No. 1 supplier for Dacia in 2015

Qualified as Tier 2 supplier for Toyota

In 2015, TMK won a number of tenders for pipe shipments to

energy and petrochemical businesses, including boiler long-

length pipe for Taman TPP’s equipment

TMK-INOX stainless pipe of 8–114 mm diameter, used in

nuclear, aircraft, automotive, aerospace and energy

industries

8

TMK Russian Division: Market Overview

Oil Production in Russia Remains Strong…

9

Russian oil production set new historic record in

November 2016, reaching 11.2 mmbpd

As part of its deal with OPEC, which was prolonged

until the end of 2018, Russia has agreed to cut

production by 300,000 bpd compared to October 2016

level

Production cuts are unlikely to be reached through

decrease in drilling activity given deteriorating well flow

dynamics across Russia(1)

Oil production remains well above 10.5 MMbpd whilst adhering to the agreement with OPEC …

…However OCTG demand is growing supported by existing level of production and development of greenfields

Source: Interfax, Info TEK

Note: (1) Please refer to slide 50 of the Appendix for an overview of the oil output adjustment commonly used in different oil production methods

Russian total oil output, MMbpd

Source: Interfax, Info TEK, Spears & Associates, TMK estimates

10.4

10.7

11.0

11.3

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2015 2016 2017

1.0

1.4

1.8

2.2

2.6

3.0

3.4

0

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

To

nn

es (m

ln)

Me

ters

(m

ln)

Meters drilled (LHS) OCTG demand (RHS)

… However There are Changes to its Composition …

10

Source: Interfax, Info TEK, TMK estimates

… is accompanied by the development of greenfield

projects …Gradual stagnation of oil production from brownfields …

… Albeit the quality of Russian reserves continues to slowly deteriorate

Brownfields production, MMbpd Greenfields production, MMbpd

Watercut, %

Source: Interfax, Info TEK Source: Interfax, Info TEK

New wells Old wells

8.0

8.5

9.0

9.5

10.0

2011 2012 2013 2014 2015 2016 20170.0

0.4

0.8

1.2

1.6

2.0

2011 2012 2013 2014 2015 2016 2017

85%

86%

87%

88%

89%

'11 '12 '13 '14 '15 '16 1H17

0%

20%

40%

60%

80%

'11 '12 '13 '14 '15 '16 1H17

4549

5457

53

60

68

76

11%12% 14%

21%

30%33%

36%

41%

0%

10%

20%

30%

40%

50%

0

20

40

60

80

2010 2011 2012 2013 2014 2015 2016 2017

km

/d

Total drilling % of horizontal drilling (RHS)

…Creating Long-term Demand for High-End Oil & Field Services

11

Russian drilling activity keeps growing …

Russian development drilling activity keeps growing with strong demand for advanced oil field services fueled by EOR

activity at brownfields

Source: CDU TEK

Sidetracking progress (# of operations)

Source: RPI 2017

Russian drilling, kmpd 2017 Russian drilling growth broken down, km

Source: Info TEK Source: Interfax, Info TEK

1,000

2,200

3,400

2011 2012 2013 2014 2015 2016 2017E

30

40

50

60

70

80

2011 2012 2013 2014 2015 2016 2017

24,908

27,648(11%) (4%) (2%)25% 20% 4%

15,000

20,000

25,000

30,000

2016 Rosneft Lukoil SurgutNG Tatneft GPN Other 2017

Attractive Portfolio of Premium OCTG Projects

12

TMK’s Home Market is One of the Lowest Cost Oil Producing Regions

13

Global oil production supply curve

Even with oil at 5 year lows, the low cost Russian and Caspian region is able to remain profitable unlike the majority of its

international counterparts. In 2015 and 2016, Russia was the only region globally to maintain healthy drilling activity and stable

OCTG demand.

Source: IEA World Energy Outlook; EIA International Energy Outlook; EIA Annual Energy Outlook; Morgan Stanley

Notes: (1) Breakeven price assumes a 10% return, and NPV of zero; *includes Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan; (2) Enhanced oil recovery; (3) Deep Water

4020 60

Eu

rop

e

Asia

Conv.

Asia DW(3)

Gas to Liquid

Coal to Liquid

NA

conv.

Aus. and Pacific

EO

R(2

)

Arc

tic

Ca

na

dia

n

Oil

Sa

nd

s

VZ

extr

a h

eavy

NA

DW

(3)

Eagle

Ford

Permian tight

Bakken

SA

DW

(3)

(prim

arily

Bra

zil)

Production (MBD)

January 2018 Brent price

Afr

ica

Off

sh

ore

OPEC, Middle East and

Africa

Russia,

Caspian region*

Asia

conv.

S.

Am

erica

(No

n-O

PE

C)

Bre

akeven p

rice (

U.S

.$/B

oe)(

1)

Low-cost supply completely in the money at current Brent price

Brent Crude 5 Year Low

0

25

50

75

100

125

80

0

2

4

6

8

10

122

00

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8E

201

9E

202

0E

202

1E

202

2E

mln

to

nn

es

Russian Tube and Pipe Market

14

36% market share of energy pipe demandNo.1 on the Russian tube and pipe market

Source: TMK estimates, based on FY2017 numbers Source: TMK estimates, based on FY 2016–2017 numbers

2016 20172017

Non-Energy

Energy

TMK24%

TMK36%

TMK38%

Strong Position on the Domestic Market

15

TMK share of seamless OCTG remains high

Seamless OCTG Market Shares, %

Growing oil drilling market in Russia

Development of conventional and unconventional

reserves will require the use of non-conventional

drilling techniques and reliable OCTG products

Russian seamless OCTG market is up 10% YoY in

2017

TMK is a leader in the production of seamless

OCTG on the Russian market with around 64%

market share for 2017

Source: TMK estimates

Source: CDU TEK, TMK estimates

64%11%

25%

TMK Import Other local producers

8.4 9.3 11.6

13.3

14.3

14.4

16.5

18.7

20.5

22.2

20.8

22.0 24.9

27.6

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0

5

10

15

20

25

30

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

units

‘000 k

m

Annual development drilling volume

Total new wells drilled (rhs)

54%44%

54%

65%

59%

58% 52% 58%55%

14%26%

26%

20%

15%

12%14%

13%15%

31% 30%

20%

15%

26%

30%34%

29%30%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

'00

0to

nn

es

Gazprom Transneft Others

LDP Demand in Russia

16

LDP demand in Russia, 2012–2020E

Source: TMK estimates

Major projects planned: Power of Siberia (GAZP), NS2 Onshore (GAZP), Power of Siberia-2

(GAZP), Sakhalin – Khabarovsk – Vladivostok GTS (GAZP), maintenance needs of Transneft and

Gazprom

Booming market Stable and constructive outlook

Strategic Cooperation Supporting Growth

17

Newly signed long-term agreements with key customers to develop and supply innovative premium

products with related services will strengthen TMK’s position

Import substitution programs guarantee purchase of tubular products and related services

TMK’s innovative products are able to considerably improve the energy efficiency of wells, as well

as safety and environmental impact

Strategic cooperation with key customers

Partnership Memorandum

Scientific and Technological Cooperation

Technology

Partnership

Program

TMK UP Connections for all Conditions

18

19

TMK American Division:

Market Overview

Strong Fundamentals Driving OCTG Consumption

20

Shale

Production

Growth Driven

by Improving

Oil & Gas

Market

Fundamentals

Increasing

OCTG

Consumption

Increasing

Unconventional

Horizontal

Drilling

Higher Rig

Count and

Higher Footage

Drilled per Rig

Longer

Laterals

More Wells

Drilled per Rig

Shale oil production is growing supported by the

O&G market recovery, which is reflected in higher

unconventional exploration activity

New levels of shale oil production are achieved by:

• Increased unconventional horizontal drilling

• Higher rig count and higher footage drilled per

rig

• More wells drilled per rig

• Longer laterals

As a result, OCTG consumption is increasing,

driven by growing needs across the energy value

chain

Strong fundamentals support OCTG demand

1

2 3 4 5

6

Improving Oil & Gas Market Fundamentals …

21

Signs that the global glut is easing…

…improve sentiment and price in 2H 2017

Sentiment has improved as the EIA’s forecast for

2018E is positive

These new estimates signal confidence that the

global oil glut is finally easing

Improved demand outlook, weaker oil and gas

investment, and the OPEC prolonging production

cuts indicate a tighter market in 2018E

EIA expects WTI to stabilise at $56-58/bbl in 2Q-4Q

2018

Growth in exports and consumption will contribute to

natural gas output rising and stabilising at $3.07-

3.15/MMBtu in 2Q-4Q 2018

Source: EIA

Source: EIA

1

90

92

94

96

98

100

102

104

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2017 2018E 2019E

MM

bb

l/d

Demand Supply

0

1

2

3

4

40

50

60

70

80

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2017 2018E 2019E

US

Natu

ral G

as (

$/M

MB

tu)

WT

I C

rud

e O

il ($

/bb

l)

WTI Crude Oil HH Natural Gas (rhs)

Source: EIA

0

3

6

9

12

15

2010 2015 2020E 2025E 2030E 2035E 2040E

Qu

ad

rilli

on

Btu

Industrial

Electric Power

Residential

Commercial

Transportation

Improving Oil & Gas Market Fundamentals … (cont’d)

22

U.S. natural gas consumption by sector,

2014 – 2040E

Growth in exports and consumption point to

higher Henry Hub natural gas prices in 2018

Source: EIA

Industrial and electric power sectors will drive demand for natural gas over the next 20 years

In early 2000, 16% of electricity was generated by natural gas and 52% by coal, while in 2017 it is expected that

31% of electricity will be generated by natural gas and 31% by coal

Natural gas storage is projected to end the 2017E injection season at below average levels, creating a tighter

supply/demand balance moving into 2018E and upward pressure on natural gas prices

1

2.0

2.5

3.0

3.5

4.0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2017 2018E 2019E

US

Natu

ral G

as (

$/M

MB

tu)

U.S. crude oil production

… Drive U.S. Shale Production …

23

According to EIA forecasts, U.S. crude oil

production is set to achieve 10.6 MMbpd and 11.2

MMbpd levels in 2018E and 2019E respectively vs.

9.3 MMbpd in 2017, driven by a corresponding

recovery of shale oil production

Shale oil production has proven resilient despite

the lower oil price environment, maximizing output

potential at lower profitability levels

U.S. shale oil production reached the pre-crisis

level of approximately 6 MMbpd in September 2017

and increased further to 6.4 MMbpd in December

2017

U.S. shale oil production(1) is growing

Notes: (1) Includes total oil production from Anadarko, Appalachia, Bakken, Eagle Ford,

Haynesville, Marcellus, Niobrara, Permian & Utica

0

1

2

3

4

5

6

7

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

Jan

-17

Jan

-18

Source: EIA

1

U.S

. shale

oil

pro

ductio

n(1

)(M

Mbpd)

5.1 5.0 5.3 5.5 5.66.5

7.5

8.79.4

8.9 9.310.6

11.2

0

2

4

6

8

10

12

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

Source: EIA

MM

bpd

… Which is Sustainable in the Long Term at Current Oil

Price Levels

24

During the past 2 years, U.S. shale players have managed to decrease production costs

─ Drilling technology has evolved, driven by efficiency requirements

─ Key changes included higher intensity of drilling, longer laterals, significantly higher usage of proppants and equipment and well

string standardization

Despite a wide variation between plays, many U.S. shale producers are profitable at oil prices in the U.S.$50-60/bbl range in the long

term

─ A number of shale plays, incl. Permian and Eagle Ford basins as well as Mid-continent region of the U.S., are profitable at around

U.S.$45-50/bbl

0 1 2 3 4 5 6 7 8

0

20

40

60

80

100

120

Bre

akeven U

.S.$

/bbl B

rent

equiv

ale

nt

Cumulative liquids production 2026E (MMbpd)

Other

Bone Spring

(Permian)Wolfcamp

(Permian)

Eagle Ford

Mid-

continent

Bakken

Niobrara

Weighted average breakeven price based on 2026E production

2018 YTD

WTI

price:

$61-65/bbl

Source: Wood Mackenzie

Continental U.S. tight oil cost curve 2026E

1

25

135149

8599

131147 146

158

100

59

111

132144

0

50

100

150

200

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8E

201

9E

U.S

. D

&C

spendin

g (

$bn)

Source: Spears & Associates

20 19 17 13 11 10 13 10 9 9 7

25 3448 56 58 63

65 73 79 81 86

5547

35 32 31 27 22 17 13 11 7

0

25

50

75

100

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Directional Horizontal Vertical

Source: Baker Hughes

Wolfcamp C

Wolfcamp B

Up Wolfcamp A

Lw Wolfcamp A

3rd Bone Spring

2nd Bone Spring

1st Bone Spring

Avalon

Number of

benches

increased

250%

2010 2017

Source: Spears & Associates, Drilling Production Report as of June 2017

Horizontal and directional drilling exceeded 90% in

2017 and has more than doubled for the last 10 years

According to Spears & Associates estimates, U.S.

drilling and completion spending doubled YoY in 2017

and will increase by 19% YoY in 2018E

Growing number of available productive benches

means that for any drilled well there is the potential for

additional drilling activity further down the line

U.S. drilling and completion spending

U.S. active rig count by type of drilling

Potential for additional drilling activity:

Permian basin (Delaware sub-basin) example

% a

s o

f year

end

Driving Increasing Unconventional Horizontal Drilling …2

…Growing Rig Count and Footage Drilled per Rig …

26

Rig count increased by 70% YoY in 2017 and is expected to grow by 13% YoY in 2018E

After a slowdown in 4Q 2017 caused by exhaustion of E&P budgets, the consensus forecast indicates

that the rig count will average in the high-900s during 2018E

Number of rigs used for horizontal drilling increased in 2017, according to Baker Hughes

According to Spears & Associates, over the past 8 years footage drilled per rig grew at a CAGR of 9%

Source: Baker Hughes, BTU Analytics, Raymond James, Spears & Associates, Inc. Source: Spears & Associates, Inc.

1,768 1,879

1,089

1,546

1,879 1,919 1,761

1,862

983

512

876 986

0

500

1,000

1,500

2,000

2,500

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E

169.1 173.7 191.1

211.1 216.8

286.9

319.1 334.8

0

100

200

300

400

2010 2011 2012 2013 2014 2015 2016 2017

Footage drilled per rigU.S. average annual rig count(1)

(000’s)

3

Notes: (1) Numbers for 2007 – 2017 based on Baker Hughes data, numbers for 2018E based on median between BTU Analytics, Raymond James, and Spears & Associates estimates

… Coupled with More Wells Drilled per Rig and Longer

Laterals …

27

Pad drilling operations allow operators to drill more

horizontal wells per rig per year

In the U.S., the average number of horizontal wells

drilled per rig has increased from an average of 8.0

wells per rig in 2010 to an average of 18.6 wells per

rig in 2017, according to Coras Oilfield Research

Increased lateral lengths and greater drilling

complexity are driving greater spending on

technologically advanced drilling consumables, such

as OCTG with premium and semi-premium

connections

− According to Spears & Associates, these

average lengths are set to increase from 7,826

feet in 2016 to 8,706 feet in 2018E

Source: Spears & Associates, Inc.

Source: Coras Oilfield Research, Baker Hughes Rig Count

8.0 7.0

8.2

10.0 11.6

15.4 16.7

18.6

0

5

10

15

20

2010 2011 2012 2013 2014 2015 2016 2017

6,880 7,323

7,826 8,194

8,706

0

2,500

5,000

7,500

10,000

2014 2015 2016 2017E 2018E

Average U.S. lateral length

Horizontal wells drilled per rig

(Feet)

54

7.3

3.6

2.1

4.6 5.05.4 5.5 5.8 6.1

0.0

2.5

5.0

7.5

10.0

2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E

API Semi-Premium Premium

U.S. consumption of OCTG reached 4.6 mln metric

tonnes in 2017, more than twice 2016

Total demand for OCTG in the U.S. is projected to

grow at a CAGR of 6% YoY in 2017 – 2022E

OCTG consumption per rig has nearly doubled

since January 2013, allowing for significant

recovery in the sector despite having fewer than

half of the rigs in operation

Seamless pipe has increased its share of total U.S.

pipe volume as the result of increased horizontal

and directional drilling as well as longer laterals

Based on the OCTG Situation Report, seamless

pipe represented c.30% of total U.S. OCTG

shipments in 2017

… Resulting in OCTG Consumption Growth …

28

Source: Preston Pipe, Baker Hughes

Total U.S. OCTG consumption

mln

metr

icto

nnes

Source: Preston Pipe, Baker Hughes

200

250

300

350

400

450

500

550

0

500

1,000

1,500

2,000

2,500

Jan

-13

Ma

y-1

3

Se

p-1

3

Jan

-14

Ma

y-1

4

Se

p-1

4

Jan

-15

Ma

y-1

5

Se

p-1

5

Jan

-16

Ma

y-1

6

Se

p-1

6

Jan

-17

Ma

y-1

7

Se

p-1

7

Jan

-18

U.S. Rig Count OCTG Consumption per Rig (tonnes/month)

Consum

ption p

er

rig (

ton

nes/m

onth

)

U.S

. ri

g c

ount

OCTG consumption per rig

6

… Inventory Normalization, Higher Efficiency …

29

Increased shipment levels bring months-of-

inventory back to pre-downturn levels

Source: Preston Pipe & Tube Report

US OCTG inventories have reached the normalized

levels of 2014 as shipments outpace consumption

Despite months of inventory having reached 2014

levels, the monthly absolute inventory is meaningfully

below pre-crisis levels due to higher industry efficiency:

Design has standardized resulting in more obsolete

inventory

E&P investment has spilled over into the

management of inventory: the amount of pipe on the

ground that was typically required to maintain a

certain rig level has decreased from previous cycles

Standardized diameters of OCTG piping


Chevron Permian Cabot Northeast

13 3/8"

9 5/8"

5 1/2"

9 5/8”

13 3/8"

5 1/2"

20"

Total Weight per well:

492 NT


323 NT


267 NT

XTO Bakken

2 7/8" 2 7/8" 2 7/8"

4 1/2"

9 5/8”

7"

6

0

2

4

6

8

10

12

1.0

1.4

1.8

2.2

2.6

3.0

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Mo

nth

s o

f In

ve

nto

ry

Ab

so

lute

in

ve

nto

ry, m

ln to

nn

es

Monthly absolute inventory

Months of inventory (rhs)

0

700

1,400

2,100

Jan-13 Feb-14 Mar-15 Apr-16 May-17

Welded OCTG priceHRC price

200

600

1,000

1,400

1,800

Apr-16 Nov-16Jun-17 Jan-18

… and Stabilization of OCTG Prices in 3Q-4Q 2017

30

U.S. distributor welded OCTG vs. HRC prices(U.S.$/tonne, monthly average)

U.S. distributor seamless OCTG vs. scrap prices(U.S.$/tonne, monthly average)

Source: Pipe Logix, AMM

Prices have rallied from the low in April 2016. Since the trough, welded OCTG prices increased by 34%

and seamless OCTG prices – by 25%

Prices declined in 4Q 2017 due to downward 4Q 2017 budget adjustments by main oil and gas

producers as the average oil price stayed below budgeted levels through 9M 2017 and stabilized in

early 2018

Raw material prices demonstrated relative flat growth in 4Q 2017 over 3Q 2017

Source: Pipe Logix, AMM

300

700

1,100

1,500

Apr-16 Nov-16Jun-17 Jan-18

0

800

1,600

2,400

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Seamless OCTG price

Scrap price

+34%

+25%

+25%

+60%

6

31

Potential Upside for Business

Sales volume (thousand tonnes)


Adjusted EBITDA (U.S.$ mln)

Adjusted EBITDA margin

Rig count reached the bottom in May

2016 at 404 rigs, but has grown by

almost 570 rigs since then

The average number of rigs in 4Q 2017

decreased by 3% compared to the prior

quarter due to downward 4Q 2017

budget adjustments by main oil and gas

producers as the average oil price

stayed below budgeted levels through

9M 2017

U.S. domestic crude production

averaged 9.3 MMbpd in 2017, up 0.5

MMbpd from the average for 2016

These factors are reflected in the

IPSCO’s financial performance:

─ Sales volume demonstrate strong

upward trend

─ Adjusted EBITDA and EBITDA

margin troughed in 1Q 2016, then

recovered in 2Q-4Q 2016 & FY 2017

5065 74

93

128

158185

199

0

40

80

120

160

200

240

1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017

-32-22

-9 -9

9

21

42 39

-40

-20

0

20

40

60

1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017

9.0%

(3.0%)

(19.6%)

5.3% 9.1%

14.5% 12.9%

(30%)

(20%)

(10%)

0%

10%

20%

2014 2015 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017

32

Strategic Overview

Key Strategic Pillars

33

Strengthen

financial

performance and

investment appeal

Maximize operating cash flow

Monetize international assets, strategic alliances and joint ventures in all regions of presence

Reduce leverage to 3.0x Net Debt(a)/ EBITDA(b) as of FY2019

Reduce leverage to 2.5x Net Debt(a)/ EBITDA(b) as of FY2021

Focus on

innovation and

digitalisation

Enhance leadership

in key segments

and enter new

product niches

Dominate the Russian OCTG and line pipe markets

Remain in the TOP 3 leading OCTG producers in the USA

Increase the share of high-tech products in the Russian division’s revenue to 50% by 2022 and

maintain a leading position in the Russian market for premium connections

Enhance the sales

platform and

leverage TMK’s

global scale

Expand commercial footprint of TMK’s products and services

Develop strategic partnerships with major customers and global consumers

Focus on offering products that have a global market and stable demand outlook, i.e.high-tech seamless

pipes and premium connections

Optimise vertical

integration

Increase capacity utilization of steelmaking facilities through higher production volumes of steel billets

and other products, and maximize the financial impact

Expand presence in further processing of tubular products (drill pipe, coating)

Develop a service offering of ready-to use comprehensive engineering solutions for customers

Note: (a) Net Debt represents interest bearing loans and borrowings plus liability under finance lease less cash and cash equivalents and short-term financial investments

(b) Adjusted EBITDA represents profit/(loss) for the period excluding finance costs and finance income, income tax (benefit)/expense, depreciation and amortisation, foreign exchange (gain)/loss, impairment/ (reversal of

impairment) of non-current assets, movements in allowances and provisions (except for provisions for bonuses), (gain)/loss on disposal of property, plant and equipment, (gain)/loss on changes in fair value of financial

instruments, share of (profit)/loss of associates and other non-cash, non-recurring and unusual items

Enhance

operational

excellence

Develop e-commerce across all divisions via TMKe Trade, the first tubular goods Internet shop in Russia

Use cutting-edge digital technology to improve product quality and cut costs

Foster a culture of continuous operational improvements and production cost cutting

Ensure consistent product quality through increasing the sustainability of technologies and personnel

qualification

USD43%

RUB54%

EUR3%

20 17 24 272356

95

197

131

449

112

22 22 22

202

4871

26 26 26

212

11

88

150

65

550

135

265

50

6635

147

1

115

365

131

65

473

-

662

22 22

157

467

48

121

26 26 26

66

27

212

0

100

200

300

400

500

600

700

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4Q 3Q

US

$ m

ln

EUR

RUB

USD

Comfortable Maturity Profile as at March 01, 2018

34

Debt currency structure

Source: TMK management accounts (figures based on non-IFRS measures), TMK estimates

As of December 31, 2017, Net Debt amounted toUS$2,688 mln

In April 2017, TMK placed a RUB 5 billion 10-yearbond with a 9.75% coupon rate

In June 2017, TMK placed a RUB 10 billion 10-year bond with a 9.35% coupon rate

In January 2018, TMK fully redeemed theremaining part of its US$500 mln 7-year Eurobondissue in the total nominal value of US$231 mln

The weighted average nominal interest ratedecreased by 86 bps over the year to 8.16% as ofthe end of FY 2017

Credit Ratings:

S&P B+, Stable

Moody’s B1, Stable

2018 2019 2020 2021 2022 2023 2025

Note: Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums.

35

Summary Financial Results

FY Consolidated Results Snapshot

36

Revenue Volumes and realised prices

Adjusted EBITDA(b) Net profit

2,560 2,410 2,412 2,668

1,842 1,461 1,046

1,113

4,4023,871

3,4583,781

0

1,000

2,000

3,000

4,000

5,000

2014 2015 2016 2017

Th

ou

sa

nd

to

nn

es

Seamless Welded

US$1,464Average

revenue/ tonne

US$1,078 US$970

US$1,085 US$921 US$796

37.97 60.66 66.90

6,009

4,127 3,338

4,394

0

1,000

2,000

3,000

4,000

5,000

6,000

2014 2015 2016 2017

US

$ m

ln

Average

USD/RUB rate(a)

(217)

(368)

166

30

(300)

(200)

(100)

0

100

200

US

$ m

ln829

651 530

605

14%

16% 16%

14%

0%

3%

6%

9%

12%

15%

18%

0

100

200

300

400

500

600

700

800

2014 2015 2016 2017

Adj. E

BIT

DA

marg

in, %

US

$ m

ln

2014 2015 2016

Adjusted EBITDA margin, %Source: TMK data

Note: (a) Average nominal USD/RUB exchange rate as published by the Central Bank of Russia.

(b) Adjusted EBITDA represents profit/(loss) for the period excluding finance costs and finance income, income tax (benefit)/expense, depreciation and amortisation, foreign exchange

(gain)/loss, impairment/ (reversal of impairment) of non-current assets, movements in allowances and provisions (except for provisions for bonuses), (gain)/loss on disposal of property, plant

and equipment, (gain)/loss on changes in fair value of financial instruments, share of (profit)/loss of associates and other non-cash, non-recurring and unusual items

US$1,181

US$1,075

58.35

693

524

437

544

0

200

400

600

800

2014 2015 2016 2017

US

$ m

ln

Gross Margin, SG&A and Cash Conversion

37

Gross margin SG&A and corporate overheads(a)

Capex and cash conversion(b) Key considerations

24% 25%26%

24%

12% 13%

8% 10%

0%

10%

20%

30%

2014 2015 2016 2017

%

Seamless Welded

293

208 175

236

65%68% 67%

61%

10%

30%

50%

70%

0

100

200

300

2014 2015 2016 2017

Cash C

onvers

ion,

%

US

$ m

ln

Source: TMK data

Note: (a) Based on IFRS financial statements. Calculated as Gross Profit less Operating profit

(b) Calculated as (Adjusted EBITDA – Capex) / Adjusted EBITDA. Adjusted EBITDA represents profit/(loss) for the period excluding finance costs and finance income, income tax

(benefit)/expense, depreciation and amortisation, foreign exchange (gain)/loss, impairment/ (reversal of impairment) of non-current assets, movements in allowances and provisions (except

for provisions for bonuses), (gain)/loss on disposal of property, plant and equipment, (gain)/loss on changes in fair value of financial instruments, share of profit)/loss of associates and other

non-cash, non-recurring and unusual items

Gross margin resilient through the cycle across both product

lines

Seamless segment accounting for more than 80% of

consolidated gross profit and demonstrates consistently

superior margins

Major reduction in SG&A in response to the revenue decline in

2015-16

Relatively high share of fixed costs in seamless segment

provides strong leverage to volume growth

Significantly optimized lean cost structure due to stringent

efficiency measures

Segmental Quarterly Performance Dynamics

38

41 45 45 48 42 50

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Sales

volume

(ths.tonnes)

Adjusted

EBITDA

margin(a), %

19% 19% 18%13% 15% 13%

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Source: TMK data

Note: (a) Adjusted EBITDA represents profit/(loss) for the period excluding finance costs and finance income, income tax (benefit)/expense, depreciation and amortisation, foreign exchange (gain)/loss,

impairment/ (reversal of impairment) of non-current assets, movements in allowances and provisions (except for provisions for bonuses), (gain)/loss on disposal of property, plant and equipment,

(gain)/loss on changes in fair value of financial instruments, share of (profit)/loss of associates and other non-cash, non-recurring and unusual item

(b) Restated

Russian division European divisionAmerican division

(9%) (8%)

5% 9% 15% 13%

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

Adjusted

EBITDA(a),

US$ mln

127 144

127 107

120 111

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

(9) (9)

9 21

42 39

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

8 6 5 6 7 11

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

710 747 675

760 756 734

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

74 93 128 158 185 199

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

(b)

(b)

18% 14% 11% 9% 13% 14%

3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17

4Q 2017 vs. 3Q 2017 Summary Financial Highlights

39

Source: TMK data

Sales were flat QoQ, with lower sales at the Russian

division offset by stronger pipe sales at the American

and European divisions

Revenue increased QoQ, due to improved performance at

the European division, higher sales at the American

division and stronger consumption of seamless OCTG

and line pipe at the Russian division

983 983

0

250

500

750

1,000

3Q2017 4Q2017

Thousand to

nnes

1,140 1,203

0

500

1,000

1,500

3Q2017 4Q2017

US

$ m

ln

0% QoQ 5% QoQ

Adjusted EBITDA decreased QoQ, largely due to higher

raw material prices and lower welded pipe sales at the

Russian division

Net loss amounted to $16 mln in 4Q 2017, compared to a

net income in the prior quarter, mainly due to lower

operating profit and an impairment of assets

-5% QoQ

169 160

15%13%

0%

3%

6%

9%

12%

15%

18%

0

50

100

150

200

3Q2017 4Q2017

EB

ITD

A m

arg

in,

%

US

$ m

ln 22

-16

-30

-20

-10

0

10

20

30

3Q2017 4Q2017

US

$ m

ln

FY 2017 vs. FY 2016 Summary Financial Highlights

40

Source: TMK data

Sales were up YoY, driven by 2.4-fold increase in sales at

the American division

Revenue increased YoY, driven by strong sales and

improved pricing at the American division and a positive

effect of currency translation

Adjusted EBITDA increased YoY, driven by a much

stronger performance from the American division

Net profit decreased YoY, mainly reflecting a lower FX

gain compared to FY 2016

9% YoY 32% YoY

14% YoY -82% YoY

3,4583,781

0

1,000

2,000

3,000

4,000

2016 2017

Thousand to

nnes

3,338

4,394

0

1,500

3,000

4,500

2016 2017

US

$ m

ln530

605

16%14%

0%

3%

6%

9%

12%

15%

18%

0

150

300

450

600

2016 2017

EB

ITD

A m

arg

in,

%

US

$ m

ln

166

300

50

100

150

200

2016 2017

US

$ m

ln

Seamless – Core to Profitability

41

Seamless84%

Welded13%

Other operations

3%

FY 2017 gross profit breakdown

Source: Consolidated IFRS financial statements, TMK data

Note: Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to

exact arithmetic sums.

US$ mln(unless stated otherwise)

4Q2017QoQ,

%2017

YoY,

%

Sales - Pipes, kt 691 11% 2,668 11%

Revenue 816 10% 3,074 31%

Gross profit 178 -9% 732 21%

Margin, % 22% 24%

Avg revenue/tonne (US$) 1,181 -1% 1,152 19%

Avg gross profit/tonne (US$) 258 -18% 274 9%

Sales - Pipes, kt 292 -19% 1,113 6%

Revenue 314 -7% 1,086 30%

Gross profit 22 -36% 111 62%

Margin, % 7% 10%

Avg revenue/tonne (US$) 1,075 15% 976 23%

Avg gross profit/tonne (US$) 75 -22% 100 52%

SE

AM

LE

SS

WE

LD

ED

Sales of seamless pipe generated 70%

of the total revenue in FY 2017

Gross profit from seamless pipe sales

represented 84% of FY 2017 total gross

profit

Gross profit margin from seamless pipe

sales amounted to 24% in FY 2017

42

Appendix – Summary Financial Accounts

Key Consolidated Financial Highlights

43

Source: TMK Consolidated Financial Statements for 2017, 2016, 2015 and 2014

(a) IFRS financials figures were rounded for the presentation’s purposes. Minor differences with FS may arise due to rounding

(b) Adjusted EBITDA represents profit/(loss) for the period excluding finance costs and finance income, income tax (benefit)/expense, depreciation and amortisation, foreign exchange (gain)/loss,

impairment/ (reversal of impairment) of non-current assets, movements in allowances and provisions (except for provisions for bonuses), (gain)/loss on disposal of property, plant and equipment,

(gain)/loss on changes in fair value of financial instruments, share of (profit)/loss of associates and other non-cash, non-recurring and unusual items.

(c) Sales include other operations and is calculated as Revenue divided by sales volumes tonnes

(d) Cash Cost per Tonne is calculated as Cost of Sales less Depreciation & Amortisation divided by sales volumes

(e) Purchase of PP&E investing cash flows

(f) Total Debt represents loans and borrowings less interest payable; Net Debt represents Total debt less cash and cash equivalents and short-term financial investments

(US$mln)(a) 2017 2016 2015 2014 2013

Revenue 4,394 3,338 4,127 6,009 6,432

Adjusted EBITDA(b) 605 530 651 829 986

Adjusted EBITDA Margin(b)(%) 14% 16% 16% 14% 15%

Profit (Loss) 30 166 (368) (217) 215

Net Profit Margin (%) 1% 5% n/a n/a 3%

Pipe Sales ('000 tonnes) 3,781 3,458 3,871 4,402 4,287

Average Net Sales/tonne (US$)(c) 1,162 965 1,066 1,365 1,500

Cash Cost per tonne (US$)(d) 862 692 783 1,030 1,108

Cash Flow from Operating Activities 312 476 684 595 703

Capital Expenditure(e) 236 175 208 293 397

Total Debt(f) 3,239 2,836 2,801 3,223 3,694

Net Debt(f) 2,688 2,479 2,471 2,939 3,568

Short-term Debt/Total Debt 18% 9% 21% 24% 11%

Net Debt/Adjusted EBITDA 4.4x 4.7x 3.8x 3.5x 3.6x

Adjusted EBITDA/Finance Costs 2.3x 2.0x 2.3x 3.6x 3.9x

Income Statement

44



(a) Calculated as Finance income less Finance costs

(US$ mln) 2017 2016 2015 2014 2013

Revenue 4,394 3,338 4,127 6,009 6,432

Cost of sales (3,521) (2,634) (3,282) (4,839) (5,074)

Gross Profit 872 704 845 1,169 1,358

Selling and Distribution Expenses (261) (220) (260) (350) (379)

General and Administrative Expenses (231) (196) (207) (278) (317)

Adverstising and Promotion Expenses (7) (6) (8) (14) (12)

Research and Development Expenses (11) (11) (13) (15) (13)

Other Operating Expenses, Net (34) (4) (35) (35) (34)

Foreign Exchange Gain / (Loss) 28 130 (141) (301) (49)

Finance Costs, Net (268) (263) (269) (226) (245)

Other (10) 35 (354) (150) 5

Income / (Loss) before Tax 78 169 (443) (201) 312

Income Tax (Expense) / Benefit (48) (4) 75 (15) (98)

Net Income / (Loss) 30 165 (368) (217) 215

Statement of Financial Position

45



(US$ mln) 2017 2016 2015 2014 2013

ASSETS

Cash and Cash Equivalents 491 277 305 253 93

Accounts Receivable 871 689 512 728 995

Inventories 1,121 769 785 1,047 1,324

Prepayments 139 107 113 113 148

Other Financial Assets 0 42 0 1 0

Total Current Assets 2,624 1,883 1,715 2,142 2,561

Total Non-current Assets 2,913 2,853 2,697 3,508 4,857

Total Assets 5,537 4,736 4,412 5,649 7,419

LIABILITIES AND EQUITY

Accounts Payable 950 735 682 831 1,111

ST Debt 610 268 600 764 398

Other Liabilities 178 48 41 48 62

Total Current Liabilities 1,738 1,051 1,323 1,643 1,571

LT Debt 2,725 2,650 2,201 2,459 3,296

Deferred Tax Liability 82 90 110 206 298

Other Liabilities 59 47 64 71 125

Total Non-current Liabilities 2,866 2,786 2,374 2,735 3,718

Equity 933 899 715 1,271 2,130

Including Non-Controlling Interest 50 55 53 66 96

Total Liabilities and Equity 5,537 4,736 4,412 5,649 7,419

Net Debt 2,688 2,479 2,471 2,969 3,600

Cash Flow

46

Source: TMK Consolidated Financial Statements for 2017, 2016, 2015 and 2014Note: Certain monetary amounts, percentages and other figures included in this presentation are subject to rounding adjustments. Totals therefore do not always add up to exact arithmetic sums

(a) Calculated as Finance costs less Finance income

(US$ mln) 2017 2016 2015 2014 2013Profit / (Loss) before Income Tax 78 169 (443) (201) 312

Adjustments for:

Depreciation and Amortisation 263 242 251 304 326

Net Finance Cost 268 263 269 226 245

Others (260) (154) 552 479 61

Working Capital Changes (253) (13) 105 (159) (159)

Cash Generated from Operations 349 506 734 648 786

Income Tax Paid (38) (31) (51) (53) (82)

Net Cash from Operating Activities 312 476 684 595 703

Capex (236) (175) (208) (293) (397)

Acquisitions 1 (11) (2) (60) (38)

Others 0 106 25 10 12

Net Cash Used in Investing Activities (235) (81) (185) (343) (423)

Net Change in Borrowings 318 (53) (193) 154 (93)

Others (197) (365) (187) (206) (313)

Net Cash Used in Financing Activities121 (418) (381) (53) (407)

Net Foreign Exchange Difference 17 (5) (65) (40) (5.0)

Cash and Cash Equivalents at January 1 277 305 253 93 225

Cash and Cash Equivalents at YE 491 277 305 253 93

47

Appendix – Capital Structure and Corporate

Governance

Capital Structure

48

TMK’s securities are listed on the London Stock

Exchange and the Moscow Exchange

As of December 31, 2017 35% of TMK ordinary

shares were in free float

Total shares outstanding amount to 1,033,135,366

One GDR represents four ordinary shares

Source: TMK

Capital structure

*The beneficiary is Dmitry Pumpyanskiy, Chairman of the Board of Directors of

TMK. Includes shares owned by TMK Steel Holding Ltd and subsidiaries of TMK

**Including Rusnano (5.3%)

TMK Steel Holding Ltd, incl. affiliates

65.06%TMK

subsidiaries0.01%

Free float34.94%

**

*

Key considerations

TMK Corporate Governance

49

The Board of Directors is comprised of

11 members, including 5 independent

directors, 4 non-executive directors

and 2 executive directors.

The Board of Directors has 3 standing

committees, chairman of each

committee is an independent director:

– Audit Committee;

– Nomination and Remuneration

Committee;

– Strategy Committee.

TMK’s day-to-day operations are

managed by the CEO and the

Management Board which consists of

eight members.

The Company has an integrated

system of internal controls which

provides assurance as to the

efficiency and management of risks of

operations.

DMITRY PUMPYANSKIY, Chairman of the Board of Directors, non-executive director

Born in 1964. Graduated from the Sergey Kirov Urals Polytechnic Institute in 1986. PhD in Technical Sciences,

Doctor of Economics. Founder and beneficial majority shareholder of TMK

Relevant experience: Chairman of the Supervisory Board of Russian Agricultural Bank, Member of the Board of

Directors at Rosagroleasing and SKB-Bank, President and Chairman of the Board of Directors of Sinara Group,

member of the Management Board of the Russian Union of Industrialists and Entrepreneurs, CEO at TMK, CEO and

a member of the Board of Directors of Sinara Group, Board member at various industrial and financial companies

MIKHAIL ALEKSEEV, Independent director, Chairman of the Nomination and Remuneration Committee.

Born in 1964. Graduated from the Moscow Finance Institute in 1986. Doctor of Economics.

Relevant experience: Chairman of the Management Board of UniCredit Bank, Chairman of the Supervisory Board

of LLC UniCredit Leasing, Chairman of the Board and President of “Rossiysky Promyishlenny Bank” (Rosprombank),

Senior Vice President and Deputy Chairman of the Management Board of Rosbank, Deputy Chairman of the

Management Board of ONEXIM Bank, Deputy Head of the General Directorate of the Ministry of Finance of the

USSR.

PETER O’BRIEN, Independent director, Chairman of the Audit Committee

Born in 1969. Graduated from Duke University (USA) in 1991 and obtained an MBA from Columbia University

Business School in 2000 and completed the AMP at Harvard Business School in 2011.

Relevant experience: Member of the Management Board, Vice President, Head of the Group of Financial Advisors

to the President of Rosneft, Co-Head of Investment Banking, Executive Director of Morgan Stanley in Russia, Vice

President at Troika Dialog Investment Company, Press Officer at the US Treasury, Chairman of the Board of

Directors of PAO TransFin-M and member of the Board of Directors of PAO T Plus.

ROBERT MARK FORESMAN, Independent director, member of the Board of Directors

Born in 1968. Graduated from Bucknell University (USA) in 1990 and Harvard University Graduate School of Arts &

Sciences in 1993.

Relevant experience: Head of Barclays Capital in Russia, Deputy Chairman of the Management Board at

Renaissance Capital, Chairman of the Management Committee for Russia and CIS at Dresdner Kleinwort

Wasserstein, Head of Investment Banking for Russia and CIS at ING Barings, Vice Chairman at UBS Investment

Bank.

ALEKSANDER SHOKHIN, Independent director, Chairman of the Strategy Committee

Born in 1951. Graduated from the Lomonosov Moscow State University in 1974. PhD, Doctor of Economics,

Professor.

Relevant experience: President of the Russian Union of Industrialists and Entrepreneurs, President of the Higher

School of Economics State University, member of the Board of Directors of AO Russian Small and Medium Business

Corporation, Board member at Lukoil, Russian Railways, member of the Public Chamber of the Russian Federation,

member of the State Duma, Minister of Labour and Employment and Minister of Economic Affairs, Head of the

Russian Agency for International Cooperation and Development, twice appointed as Deputy Head of the Russian

Government, Russia’s representative to IMF and World Bank.

SERGEY KRAVCHENKO, Independent director, member of the Board of Directors

Born in 1960. Graduated from the Moscow State University of Mechanical Engineering in 1982. Professor,

Doctor of Technical Science.

Relevant experience: President of Boeing Russia and CIS since 2002, responsible for the company’s business

development in Russia and CIS. Prior to joining Boeing in 1992 was a lead member of the Russian Academy of

Sciences.

Key considerations

50

Appendix – TMK Products

Wide Range of Products

51

Well equipment precision manufacturing,

tools’ rental, supervising, inventory

management, threading and coating services.

Oilfield Services

Premium

Premium connections are

proprietary value-added

products used to connect

OCTG pipes and are used

in sour, deep well, off-

shore, low temperature and

other high-pressure

applications.

Premium

Connections

(TMK UP)

Welded

Threaded pipes for the oil

and gas industry including

drill pipe, casing and

tubing.

OCTG

The short-distance

transportation of crude oil,

oil products and natural

gas.

Line Pipe

Construction of trunk

pipeline systems for the

long distance

transportation of natural

gas, crude oil and

petroleum products.Large-

Diameter

Wide array of applications

and industries, including

utilities and agriculture.

Industrial

Seamless

Threaded pipes for the oil

and gas industry including

drill pipe, casing and

tubing.

OCTG

The short-distance

transportation of crude oil,

oil products and natural

gas.

Line Pipe

Automotive, machine

building, and power

generation sectors.

Industrial

TMK Premium Product Offering

52

Source: TMK data

TMK connections series Premium products and services

TMK to maintain its share of premium connections

market with greater focus on sales of 2nd and 3rd

generation premium connections to improve sales

efficiency and enhance competitive advantage

TMK is actively developing HI-TECH products for

unconventional reserves, including offshore deposits:

OCTG: with Premium threading, Cr13,

GreenWell technology, alloy OCTG (L80,

С90, Т95, Р110) mostly with Premium

threading

Stainless steel pipe

Pipe with increased corrosion resistance

Vacuum insulated tubing

LDP

Pipes with premium connections are designed for O&G wells developed in challenging exploration and production conditions,

including offshore, deep-sea and Far North locations, as well as for horizontal and directional wells

Extreme torsional resistance

for high operational torque

Ability to withstand high

tension, compression and

bending loads at excessive

internal and external pressure

Easy and reliable make-up

Comprises connections with

metal-to-metal seals and

positive torque stops that

provide gas tightness and

ensure reliability in difficult

well conditions

Higher resistance to torque

for casing while drilling and

rotating

A comprehensive line of

semi-premium connections

designed to outperform

standard API connections

Lite

Series

Classic

Series

Pro Series Torq Series

Premium Solutions: TMK UP

53

ULTRA QX

2009

ULTRA CX

2008

ULTRA FX

2003

ULTRA FJ

2003

Cal IV

ULTRA DQX

2011

Cal IICal IVCal IV Cal II

ULTRA DQXHT

2013

Cal II

ULTRA SFII

2013TMK BPN

2013

TMK-2S

2013

ULTRA GX

2016

TWCCEPCal IV

SXC

2009ULTRA QX

TORQ2016

ULTRA SF

2003

TMK GF

2005

TMK PF

2007

Cal IV

TMK FMC

2005

TMK TTL 01

2005

TMK CS

2005

ТМК 1

2004

TMK FMT

2008

TMK PF ET

2008

TMK TDS

2010

TMK CWB

2011

Cal IV

TMK PF Tubing

2012

Cal IVCal II Cal IICal IV

TMK UP Magna2013

TMK UPCentum

2014

• Horizontal and extended reach

• Drilling with casing

• Steam-Assisted Gravity Drainage (SAGD)

• Connections are available with GreenWell

environment friendly technology

Unique range of Premium products

• Onshore/offshore

• Sour gas

• Thermal

• Arctic

Utilisation of TMK Pipe Products in Oil and Gas Industry

54

OCTG – Oil Country Tubular Goods (drilling, casing, tubing) used for oil & gas exploration, well fixing and oil & gasproduction (46% of total sales for FY 2017)

Line pipe – used for short distance transportation of crude oil, oil products and natural gas (23% of total sales for FY 2017)

LDP - large diameter pipe used for construction of trunk pipeline systems for long distance transportation of natural gas,crude oil and petroleum products (7% in total sales for FY 2017)

55

Appendix – Other Materials

TMK’s Undisputed Market Leading Position in Russia

56

Source: TMK estimates, based on FY 2017 numbers

Premium

Premium connections are

proprietary value-added

products used to connect

OCTG pipes and are used

in sour, deep well, off-

shore, low temperature and

other high-pressure

applications

Welded

Short-distance

transportation of O&G

and oil products

Construction of trunk

pipeline systems for long

distance transportation of

O&G and petroleum

products

Wide array of applications

and industries, including

utilities and agriculture

Seamless

Threaded pipes for O&G

industry including drill

pipe, casing and tubing

Short-distance transport

of crude oil, oil products

and natural gas

Automotive, machine

building, and power

generation sectors

OCTG

Large Diameter

Industrial

Line Pipe

Line Pipe

Industrial

Premium

Connections

(TMK UP)

#1 in the Russian Tube and Pipe

Market

TMK will continue to grow its market share due to expected increased competitiveness of domestically

produced pipes vs. imported ones (due to RUB depreciation)

TMK64%

TMK60%

TMK36%

TMK18%

TMK16%

TMK8%

TMK79%

TMK24%

TMK Investor Relations

40/2a, Pokrovka Street, Moscow, 105062, Russia

+7 (495) 775-7600

[email protected]

TMK IR PRESENTATION€¦ · TMK –Top-3 US OCTG producer with its market share at 10% in 2017...

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